World Bank Retains India’s FY25 Growth Forecast at 6.6%

In its latest biannual Global Economic Prospects, the World Bank maintains India’s growth projection at 6.6% for FY25, affirming its status as the fastest-growing among the largest economies. The forecast reflects a moderate pace of expansion following a high growth rate in FY 2023/24. Over the subsequent three fiscal years, India is expected to sustain an average growth of 6.7%, with projections of 6.7% for FY26 and 6.8% for FY27.

Moderation in Growth and Investment Outlook

The World Bank anticipates a moderation in India’s growth trajectory, primarily attributed to a slowdown in investment from a high base. However, investment growth is expected to remain robust, supported by strong public and private investment. Private consumption is poised to benefit from agricultural production recovery and declining inflation, while government consumption is projected to grow slowly in alignment with fiscal objectives.

Factors Influencing Economic Prospects

The RBI’s upward revision of growth projection for FY25 to 7.2% underscores optimistic prospects driven by various factors. These include the forecast of an above-normal southwest monsoon, expected to boost agricultural production and rural consumption. Additionally, buoyancy in services activity, coupled with robust investment sentiment, is anticipated to sustain economic momentum. External demand is also expected to improve, further bolstering growth prospects.

Fiscal Dynamics and Domestic Demand

India’s fiscal deficit is projected to decrease relative to GDP, partly due to enhanced revenue generation efforts aimed at broadening the tax base. Strong domestic demand, characterized by increased investment and robust services activity, continues to underpin India’s economic resilience. Overall, India, along with other large Emerging Market and Developing Economies (EMDEs), is expected to maintain solid per capita growth, reflecting the country’s enduring economic dynamism.